MannKind Corporation (NASDAQ:MNKD) has secured a $175 million loan facility with Delaware-based Aventisub LLC. Notably, Aventisub is an affiliate of French drugmaker Sanofi SA (ADR) (NYSE:SNY) (EPA:SAN). The loan facility will fund MannKind’s share of losses under the company’s license and collaboration deal with Sanofi.

MannKind Corporation Signs Security Agreement With Sanofi Affiliate

MannKind closes licensing agreement with Sanofi

On August 11, the Valencia, California-based company signed a worldwide licensing agreement with Sanofi to market its inhaled insulin drug Afrezza for Type-1 and Type-2 diabetes. MannKind closed the licensing deal with its French partner last Wednesday. Under the terms of the licensing agreement, Sanofi will pay MannKind $150 million upfront within ten days of the closing.

Sanofi has agreed to pay $925 million in total. But the remaining $775 million will be paid in several milestones, depending on the performance of Afrezza, between 2015 and 2025. Under the loan facility with Aventisub, MannKind’s obligations are guaranteed by its wholly-owned subsidiary MannKind LLC. The loan carries an annual interest rate of 8.5%.

To produce Afrezza, MannKind will source insulin API from Amphastar France Pharmaceuticals SAS. The U.S. biopharmaceutical company has agreed to buy insulin worth at least €120.1 million per year through 2019. However, MannKind has been looking to diversify its insulin API supplier base. MannKind CFO Matthew Pfeffer said earlier this month at a conference that the company was interested in signing an insulin supply deal with Sanofi.

Will Sanofi become MannKind’s second insulin supplier?

The French pharmaceutical major already has an extensive experience in insulin production, and it’s also MannKind’s partner in commercializing Afrezza. Therefore, Sanofi supplying the key active ingredient for Afrezza makes sense for both companies. The French company’s blockbuster diabetes drug Lantus will go off-patent next year.

MannKind shares fell 0.82% to $6.05 at 1:42 PM EDT on Monday. The stock has tumbled more than 42% since MannKind’s Afrezza won the FDA approval. Diabetes is a serious health problem worldwide. There are about 26 million diabetes patients in the U.S. alone, representing a huge opportunity for MannKind’s rapid-action inhaled insulin.